1099 vs W-2: tax differences explained
1099 contractors pay self-employment tax and make quarterly payments, while W-2 employees have withholding handled through payroll. This guide explains the major tax differences for 2025-2026 and links to calculators that estimate take-home pay and tax liability.
Key tax differences
- 1099 income is subject to self-employment tax.
- W-2 income is subject to payroll withholding and employer payroll taxes.
Planning for 1099 income
- Set aside a percentage of income for taxes.
- Plan quarterly estimated payments.
Planning for W-2 income
- Use a W-4 calculator to align withholding.
- Adjust for bonuses or life changes.
Related calculators
1099 tax estimator
Estimate total tax on 1099 earnings.
Self-employment tax estimator (SECA)
Estimate SE tax on contract income.
Quarterly estimated payments planner
Plan quarterly payments for 1099 income.
W-4 withholding optimizer
Adjust W-4 withholding for W-2 income.
Paycheck take-home calculator
Estimate net pay after withholding.
FAQ
Do 1099 contractors pay more taxes than W-2 employees?
Contractors pay self-employment tax but can also deduct business expenses, so outcomes vary.
Updated 2026-01-20. TaxGuide Pro provides educational tax guidance, not legal advice.